FINANCIAL ADVISOR INSIGHTS: Belski - 4 Reasons Everyone Should Stop Comparing 2014 To The Late 90s
4 Reasons Everyone Should Stop Comparing 2014 To The Late 90s (BMO Capital Markets)
After a stunning run up in the late 90s the stock market ended with a tech bubble. While many are comparing 2014 to the bubblicious late 1990s, "when the market went on its unprecedented performance run leading to the tech bubble finale," Brian Belski of BMO Capital Markets thinks these comparisons are unwarranted for four key reasons.
1. Market performance history - 2014 is likely to be a "tamer year" because its "exceptionally rare" to have six straight years with no losses and market returns struggle after consecutive years of double digit returns. 2. Investor participation - "Strong and lasting bull markets require significant individual investor participation. Until recently this group had been aggressively selling stocks." 3. Economic backdrop - "The economic backdrop is the most obvious difference to us when comparing the current environment to the late 1990s. Broader economic measures are still well below the healthy levels exhibited back then." 4. Proximity to last major bear market - In the 90s investors were about 20 years away from the last bear market this time around however investors have suffered two major bear markets in the last ten years and this is still fresh in the mind of investors.
Vanguard Warns Investors Looking To Load Up On Stocks (ThinkAdvisor)
A poll during a Vanguard webinar showed that more than half of Vanguard investors wanted to increase their equity holdings this year. 33% said they were "somewhat likely to" and 24% said they were "very likely" to increase their equity holdings. But Tim Buckley, CIO at Vanguard, warned that "often, after great returns … people chase them and risk getting in after a run-up." He warned investors against over-allocating to stocks. Buckley pointed out that valuations are "getting pricey" and CEO Bill McNabb warned of surprises in markets this year in terms of changes in Fed policy and quantitative easing, reports Janet Levaux at ThinkAdvisor.
Global Bond Funds Draw $5.3 Billion (Reuters)
Investors pumped $5.3 billion into global bond funds in the week ended January 8, according to the latest report from Bank of America. This was the biggest inflow since May of 2013. Meanwhile, investors pulled $400 million out of equity funds. Global bond funds pulled in just $1.4 billion in new cash in 2013 after seeing constant redemptions on concerns about the Fed taper, reports Sam Forgione at Reuters.
How Advisors Can Give Their Clients Access To Structured Credit (The Wall Street Journal)
Rates of return on structured credit - securities made up of different kinds of debt - are nearly double that of corporate credit, writes Brian Walsh, chairman and CIO of Saguenay Strathmore Capital in a new WSJ column. Naturally, this could pique investor interest, but how can an advisor access it for their client?
"In our opinion, hedge funds are by far the best avenue for accessing structured credit. Their professionals have the modeling expertise to extract value from these assets. However when you access structured credit through hedge funds, the opportunity is limited to clients whose income or net worth meet the fund's prescribed thresholds. Unless your client has a net worth of $5 million or more, structured credit isn't an opportunity that's available to them.
"But if your clients do have the means and the interest and you have a relationship with a hedge fund adviser or consultant, the upside of structured credit is, in our opinion, better than just about anywhere in the credit universe right now."